10A NCAC 22G .0203. EXCEPTIONS TO DRG REIMBURSEMENT

(a)  Covered psychiatric and rehabilitation inpatient services provided in either specialty hospitals, Medicare recognized distinct part units (DPU), or other beds in general acute care hospitals shall be reimbursed on a per diem methodology.

(1)           For the purposes of this Section, psychiatric inpatient services are defined as admissions where the primary reason for admission would result in the assignment of DRGs in the range 424 through 432 and 436 through 437.

For the purposes of this Section, rehabilitation inpatient services are defined as admissions where the primary reason for admissions would result in the assignment of DRG 462.  All services provided by specialty rehabilitation hospitals are presumed to come under this definition.

(2)           When a patient has a medically appropriate transfer from a medical or surgical bed to a psychiatric or rehabilitative distinct part unit within the same hospital, or to a specialty hospital, the admission to the distinct part unit or the specialty hospital shall be recognized as a separate service which is eligible for reimbursement under the per diem methodology.

Transfers occurring within general hospitals from acute care services to non‑DPU psychiatric or rehabilitation services are not eligible for reimbursement under this Section.  The entire hospital stay in these instances shall be reimbursed under the DRG methodology.

(3)           The per diem rate for psychiatric services is established at the lesser of the actual cost trended to the rate year or the calculated median rate of all hospitals providing psychiatric services as derived from the most recently filed cost reports.

(4)           Hospitals that do not routinely provide psychiatric services shall have their rate set at the median rate.

(5)           The per diem rate for rehabilitation services is established at the lesser of the actual cost trended to the rate year or the calculated median rate of all hospitals providing rehabilitation services as derived from the most recently filed cost reports.

(6)           Rates established under this Paragraph shall be adjusted for inflation consistent with the methodology under Rule .0211 Subparagraph (d)(5) of this Section.

(b)  To assure compliance with the separate upper payment limit for State‑operated facilities, the hospitals operated by the Department of Health and Human Services and all the primary affiliated teaching hospitals for the University of North Carolina Medical Schools shall be reimbursed their reasonable costs in accordance with the provisions of the Medicare Provider Reimbursement Manual.  This Manual (referred to as HCFA Publication #15‑1) is hereby incorporated by reference including any subsequent amendments and editions.  A copy is available for inspection at the Division of Medical Assistance, 1985 Umstead Drive, Raleigh, NC.  Copies may be obtained from the U.S. Department of Commerce, National Technical Information Service, Subscription Department, 5285 Port Royal Road, Springfield, VA 22161 at a cost of one hundred seventy seven dollars (177.00).  Purchasing instructions may be received by calling 1-800-363-2068.  Updates are available for an additional fee.  The Division shall utilize the DRG methodology to make interim payments to providers covered under this Paragraph, setting the hospital unit value at a level which can best be expected to approximate reasonable cost.  Interim payments made under the DRG methodology to these providers shall be retrospectively settled to reasonable cost.

(c)  When the Norplant contraceptive is inserted during an inpatient stay the current Medicaid fee schedule amount for the Norplant kit shall be paid in addition to DRG reimbursement.  The additional payment for Norplant shall not be paid when a cost outlier or day outlier increment is applied to the base DRG payment.

(d)  Hospitals operating Medicare approved graduate medical education programs shall receive a per diem rate adjustment which reflects the reasonable direct and indirect costs of operating these programs.  The per diem rate adjustment shall be calculated in accordance with the provisions of Rule .0211 Paragraph (f) of this Section.

(e)  Hospitals licensed by the State of North Carolina and reimbursed under the DRG methodology for more than 50 percent of their Medicaid inpatient discharges for the fiscal years ending September 30, 2000 and thereafter shall be entitled to a lump sum payment for the period from September 18, 2000 through September 30, 2000.  Lump sum payments for subsequent fiscal years calculated and paid no less frequently than annually and no more frequently than quarterly for inpatient and outpatient hospital services in amounts or percentages determined by the Director of the Division of Medical Assistance, for periods preceding or following the payment date subject to the provisions of Subparagraphs (1) through (7) of this Paragraph.

(1)           To ensure that the payments authorized by this Paragraph do not exceed the applicable upper limits, such payments (when added to Medicaid payments received or to be received for these services) shall not exceed for the 12 month period ending September 30th of the year for which payments are made the applicable percentage of:

(A)          The reasonable cost of inpatient and outpatient hospital Medicaid services; plus

(B)          The reasonable direct and indirect costs attributable to inpatient and outpatient Medicaid services of operating Medicare approved graduate medical education programs.

(2)           For purposes of this Paragraph:

(A)          The phrase "applicable percentage" refers to the upper payment limit as a percentage of reasonable costs established by 42 C.F.R. 447.272 and 42 C.F.R. 447.321 for different categories of hospitals.

(B)          Reasonable costs shall be ascertained in accordance with the provisions of the Medicare Provider Reimbursement Manual as defined in Paragraph (b) of this Rule. 

(C)          The phrase "Medicaid payments received or to be received for these services" shall exclude all Medicaid disproportionate share hospital payments received or to be received.

(3)           Qualified public hospitals shall receive payments under this Paragraph in amounts (including the expenditures described in Part A (iii) of this Subparagraph) not to exceed the applicable percentage of each hospital's Medicaid costs for the 12 month period ending September 30th of the fiscal year for which such payments are made, less any Medicaid payments received or to be received for these services.

(A)          A qualified public hospital is a hospital that meets the other requirements of this Paragraph; and

(i)            was owned or operated by a State (or by an instrumentality or a unit of government within a State) during the period for which payments are made; and

(ii)           verified its status as a public hospital by certifying State, local, hospital district or authority government control on the most recent version of Form HCFA-1514 filed with the Health Care Financing Administration, U. S. Department of Health and Human Services at least 30 days prior to the date of any such payment that remains valid as of the date of any such payment; and

(iii)          files with the Division on or before 10 working days prior to the date of any such payment by use of a form prescribed by the Division certification of expenditures eligible for FFP as described in 42 C.F.R. 433.51(b).  This provision shall not apply to qualified public hospitals that are also designated by North Carolina as Critical Access Hospitals pursuant to 42 USC 1395i-4.

(4)           Hospitals licensed by the State of North Carolina and reimbursed under the DRG methodology for more than 50 percent of their Medicaid inpatient discharges for the fiscal years ending September 30, 2000 and thereafter that are not qualified public hospitals as defined in this Paragraph shall be entitled to lump sum payments in amounts that do not exceed the applicable percentage of each hospital's Medicaid costs (calculated in accordance with Subparagraph (1) of this Paragraph) for the 12 month period ending September 30th of the fiscal year for which such payments are made less any Medicaid payments received or to be received for these services.

(5)           Payments authorized by this Paragraph shall be made solely on the basis of an estimate of costs incurred and payments received for inpatient and outpatient Medicaid services for the period for which payments are made.  The Director of the Division of Medical Assistance shall determine the amount of the estimated payments to be made by analysis of costs incurred and payments received for Medicaid services as reported on the most recent cost reports filed before the Director’s determination is made and supplemented by additional financial information available to the Director when the estimated payments are calculated if and to the extent that the Director concludes that the additional financial information is reliable and relevant.

(6)           To ensure that estimated payments pursuant to Subparagraph (5) of this Paragraph do not exceed the aggregate upper limits to such payments established by applicable federal law and regulation (42 C.F.R. 447.272 and 42 C.F.R. 447.321), such payments shall be cost settled within 12 months of receipt of the completed and audited Medicare/Medicaid cost reports for the period for which payments are made.  There shall be a separate cost settlement procedure for inpatient and outpatient hospital services.  In addition for both inpatient and outpatient hospital services, there shall be a separate aggregate cost settlement pool for qualified public hospitals that are owned or operated by the State, for qualified public hospitals that are owned or operated by an instrumentality or unit of government within a State and for hospitals qualified for payment under this Paragraph that are not qualified public hospitals.  As to each of these separate cost settlement procedures, if it is determined that aggregate payments under this Paragraph exceed aggregate upper limits for such payments, any hospital that received payments under this Paragraph in excess of unreimbursed reasonable costs as defined in this Paragraph shall promptly refund its proportionate share of aggregate payments in excess of aggregate upper limits. The proportionate share of each such hospital shall be ascertained by calculating for each such hospital its percentage share of all payments to all members of the cost settlement group that are in excess of unreimbursed reasonable costs, and multiplying that percentage times the amount by which aggregate payments being cost settled exceed aggregate upper limits applicable to such payments.  No additional payment shall be made in connection with the cost settlement.

(7)           The payments authorized under this Paragraph shall be effective in accordance with G.S. 108A-55(c).

(f)  Subject to availability of funds, hospitals licensed by the State of North Carolina and reimbursed under the DRG methodology for more than 50 percent of their Medicaid inpatient discharges for the fiscal years ending September 30th and thereafter; that are not qualified public hospitals as defined in Paragraph (e)(3)(A) of this Rule; that operate Medicare approved graduate medical education programs and reported on cost reports filed with the Division of Medical Assistance Medicaid costs attributable to such programs; and that incur unreimbursed costs for providing inpatient and outpatient services to uninsured patients in an amount in excess of two million five hundred thousand dollars ($2,500,000) shall be eligible for a lump sum payment for the period from September 18, 2000 through September 30, 2000.  Lump sum payments for subsequent fiscal years calculated and paid no less frequently than annually and no more frequently than quarterly in amounts or percentages determined by the Director of the Division of Medical Assistance, for periods preceding or following the payment date subject to the provisions of Subparagraphs (1) through (7) of this Paragraph.

(1)           Qualification for 12 month periods ending September 30th of each year shall be based on the most recent cost report data and uninsured patient data filed with and certified to the Division by hospitals at least 60 days prior to the date of any payment under this Paragraph.

(2)           To ensure that the payments authorized by this Paragraph do not exceed the applicable upper limits, such payments (when added to Medicaid payments received or to be received for these services) shall not exceed for the 12 month period ending September 30th of the year for which payments are made the applicable percentage of:

(A)          The reasonable cost of inpatient and outpatient hospital Medicaid Services; plus

(B)          The reasonable direct and indirect costs attributable to inpatient and outpatient Medicaid services of operating Medicare approved graduate medical education programs.

(3)           For purposes of this Paragraph:

(A)          The phrase "applicable percentage" refers to the upper payment limit as a percentage of reasonable costs established by 42 C.F.R. 447.272 and 42 C.F.R. 447.321 for different categories of hospitals.

(B)          Reasonable costs shall be ascertained in accordance with the provisions of the Medicare Provider Reimbursement Manual as defined in Paragraph (b) of this Rule.

(C)          The phrase "Medicaid payments received or to be received for these services" shall exclude all Medicaid disproportionate share hospital payments received or to be received, but shall include all Medicaid payments received other than disproportionate share hospital payments, calculated after any payments made pursuant to Paragraph (e) of this Rule.

(4)           Under no circumstances shall the payment authorized by this Paragraph exceed a percentage of the hospital's unreimbursed cost for providing services to uninsured patients determined by the Division under Paragraph (e) of Rule .0213 of this Section.

(5)           Payments authorized by this Paragraph shall be made solely on the basis of an estimate of costs incurred and payments received for Medicaid services during the period for which payments are made. The Director of the Division of Medical Assistance shall determine the amount of the estimated payments to be made by analysis of costs incurred and payments received for Medicaid inpatient and outpatient services as reported on the most recent cost reports filed before the Director's determination is made and supplemented by additional financial information available to the Director when the estimated payments are calculated if and to the extent that the Director concludes that the additional financial information is reliable and relevant. 

(6)           To ensure that estimated payments pursuant to Subparagraph (5) of this Paragraph do not exceed the aggregate upper limit to such payments established by applicable federal law and regulation (42 C.F.R. 447.272 and 42 C.F.R. 447.321), such payments shall be cost settled within 12 months of receipt of the completed and audited Medicare/Medicaid cost reports for the period for which such payments were made.  The cost settlement shall be as described in Paragraph (e)(6) of this Rule.

(7)           The payments authorized by this Paragraph shall be effective in accordance with G.S. 108A-55(c).

 

History Note:        Authority G.S. 108A‑25(b); 108A‑54; 108A‑55(c); 42 C.F.R. 447, Subpart C; 42 C.F.R. 447.321;

Eff. February 1, 1995;

Temporary Amendment Eff. September 15, 1995, for a period of 180 days or until the permanent rule becomes effective, whichever is sooner;

Amended Eff. January 1, 1996;

Temporary Amendment Eff. September 25, 1996;

Temporary Amendment Eff. September 30, 1997;

Temporary Amendment Expired July 31, 1998;

Temporary Amendment Eff. September 16, 1998;

Temporary Amendment Expired June 13, 1999;

Temporary Amendment Eff. September 22, 1999;

Temporary Amendment Expired July 11, 2000;

Temporary Amendment Eff. June 13, 2001; September 21, 2000;

Temporary Amendment Eff. May 15, 2002;

Amended Eff. April 1, 2003.